(1) Albert manufactures and sells a single product.

The following budgeted/ actual information is provided in relation to the production of this product:

Selling price per unit 50.00

Direct materials per unit 8.00

Direct labour per unit 5.00

Variable production overheads per unit 3.00

Details for the months of Jan and Feb 2010 are as follows:

Jan Feb

Production of Product A 500 380

Sales of Product A (units) 300 500

Fixed production overheads are budgeted at Kshs. 4,000 per month and are absorbed on a unit basis. The normal level of production is budgeted at 400 units per month.

Other costs:

Fixed selling Kshs.4, 000 per month

Fixed Administration Kshs. 2,000 per month

Variable sales commission 5% of sales revenue

There was no opening inventory of Product A at the start of Jan.

Required:

Using Absorption Costing calculate

(a) Calculate the Full Production cost (2 Marks)

(b) Calculate value of inventory and production (2 Marks)

Under/over absorbed fixed production overhead (1 Mark)

(d) Prepare a statement of Absorption costing income statements( Jan and Feb) (5 Marks)

(2) Based on the following data of number of units produced and the corresponding total cost, estimate the total cost of producing 4,000 units. Use the least-squares linear regression method. (5 marks)

Month	Units	Cost
1	1,520	36,375
2	1,250	38,000
3	1,750	41,750
4	1,600	42,360
5	2,350	55,080
6	2,100	48,100
7	3,000	59,000
8	2,750	56,800